Emblaze Abandons 'First Israeli Cell Phone,' and Writes Off $100m

After months of trying to close agreements with distributors for its mobile phone, Emblaze has admitted that "the first Israeli cell phone" is a resounding failure. It is abandoning the venture and firing all 30 people involved in its manufacture.

Despite some interest in the phone, Emblaze has not been able to sign any agreements. Its board of directors therefore opted to cease any investment in the phone and concentrate instead on selling the technology and platform developed for it.

Emblaze has invested some $100 million in the Else phone, causing the company repeated losses. The Else was meant to compete with Apple's iPhone, since some of its hardware features were better than the iPhone's. But Apple has since improved the iPhone, and other competitors have also emerged with better hardware than the Else has.

The trouble is that Emblaze could not find mobile phone providers who would market the phone quickly enough - and by now, the Else's hardware is no match for those of its competitors. To match the current state of the market would have required further investment, and after spending $100 million, the board decided to call it a day.

Moreover, it is hard to invest in a second-generation version of a phone that never got launched.

Emblaze has two divisions - Growth and Innovation. Growth controls Formula Systems and its subsidiaries: Magic Software Enterprises, Sapiens International Corporation and Matrix IT Ltd. This division produces the income. Innovation controls Zone IP Ltd., Emoze Ltd. and Else, and it sucks up most of the money, generating losses of $17 million in 2009 as against income of $4.4 million. Since the Growth division posted income of $469.4 million and net profit of $7.9 million, that left Emblaze with overall losses of $9.1 million.

Meanwhile, the embattled founder of the cellular technology firm, Eli Reifman, is to begin serving a 45-day prison sentence for contempt of court Sunday.

He had been required to hand over his shares to a receiver amid bankruptcy proceedings.